Pandemic hurts San Antonio-based Clear Channel’s 1Q results

San Antonio-based Clear Channel Outdoor Holdings Inc. has donated use of digital billboards to promote a message that area stores and restaurants are “open for business” during the coronavirus crisis. Clear Channel has been cutting costs to brace for the pandemic’s effects on its outdoor advertising.

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Perhaps the biggest question hanging over Clear Channel Outdoor Holdings Inc. in the midst of the pandemic is whether advertisers will resume spending as quickly as officials at the San Antonio-based outdoor advertising company hope.

In the meantime, Clear Channel’s Worldwide CEO William Eccleshare said Wednesday it’s difficult to forecast what sort of a downturn it will endure as advertisers defer buying decisions and reduce marketing expenditures.

“We don’t even yet know what the timing of the end of the lockdown in different states and different countries are going to be,” Eccleshare said on a conference call with analysts. “And we don’t have any real sense of what the damage to the economies are going to be. And we don’t yet know how advertisers are going to respond to this.”

The uncertainty has executives keeping a “daily eye on our pipeline,” he added. “In some cases, there are signs of a positive pipeline building as things return to normal. But it’s way too early to call a number for (the second quarter), I’m afraid.”

Clear Channel’s net loss widened on lower revenue in the first quarter. It reported a loss of $291.7 million, or 60 cents a share, on $550.8 million in revenue. By comparison, it lost $165.2 million, or 45 cents a share, on $587.1 million in revenue in the same period last year.

The pandemic hobbled the company largely in Europe and China, where revenues already were sliding before the crisis. Revenue actually rose in the Americas, primarily in the U.S. where COVID-19’s spread will be felt in second-quarter results.

Clear Channel has been bracing for the impact. It has taken cost-cutting measures to maintain “financial flexibility,” including temporarily cutting salaries, reducing hours for hourly employees and implementing furloughs. Eccleshare and Scott Wells, CEO of the Americas division, each took 30 percent pay cuts effective last month.

The company had 1,700 U.S. employees and 4,200 international employees as of Dec. 31. It has more than 460,000 advertising displays in 32 countries.

Clear Channel has been negotiating with landlords of its billboard and display locations to align lease expenses with shrinking revenue.

“We have thousands of landlords and the process of engaging is one that you need to do kind of landlord by landlord,” Wells said. The company is seeing “good partnership” with its government landlords but success with private landlords has been slower, he added.

The company has a goal of axing more than $100 million in costs from the business and achieving more than $25 million in savings from reduced capital expenditures during the current quarter.

Clear Channel also has drawn down on a $150 million revolving credit facility, becoming the first San Antonio-based publicly traded company to announce it was tapping a line of credit in response to COVID-19.

In addition, the company expects to net $220 million from the sale of a 51 percent stake in a Chinese subsidiary.

Clear Channel was spun off from iHeartMedia Inc. last year as part of the San Antonio broadcast company’s bankruptcy reorganization.

Outdoor advertising was experiencing “great momentum” before the pandemic’s arrival, JPMorgan Chase & Co. analyst Alexia Quadrani said last month in a report on the state of the industry.

Advertisers have been shifting outdoor advertising campaigns to later in the year rather than canceling them entirely.

“Overall, we expect (outdoor advertising) to maintain its relevancy in the advertising market following the COVID-19 crisis and for the medium to see a return to growth once normal out-of-home activity resumes,” Quadrani added.

Clear Channel’s shares closed at almost 76 cents Wednesday. The shares have traded below $1 for 38 consecutive days, falling as low as about 43 cents on March 23.